Carmakers unfazed by WTO entry

The nation's WTO entry is expected to provide stiffer competition for many local industries, including the auto market. But Jeffrey Shen, president of Ford Lio Ho Motor Co, says Taiwan's carmakers will remain competitive. last week, he talked with `Taipei Times' staff reporter Joyce Huang about possible price fluctuations and the outlook for the domestic sector

/

Jeffrey Shen, president of Ford Lio Ho Motor Co.

PHOTO COURTESY OF FORD LIO HO MOTOR CO

Taipei Times: After Taiwan joins the WTO, local consumers are expecting prices of foreign cars to gradually drop to affordable levels. What do you think the impact will be on local auto market?

Jeffrey Shen (沈英銓): Consumers are under the misconception that following WTO entry, import tariff cuts will dramatically reduce imported car prices. We don't think that will be the case. Import tariffs will gradually be lowered from the current 30 percent to 17.5 percent in eight to 10 years.

That is, on average, only a 1 percent to 1.5 percent reduction per year to push dealers to lower prices by a few thousand NT dollars. Consumers will hardly notice a difference of a few thousand dollars since this is a highly competitive market.

While local dealers tend to offer premiums of more than NT$10,000, consumers are unlikely to rush to buy a foreign car simply because of a difference of a few thousand NT dollars.

Therefore, I don't think the market share of imported cars, which is 18 percent now, will climb to above 25 percent within the next five years. However, a commodity tax cut from 60 percent to 35 percent [in five years] is likely to greatly slash prices of imported luxury cars with engines over 3,600cc and priced above NT$2 million.

A 25 percent tax reduction means a price cut of at least NT$500,000, which will spur customers at the top of the pyramid to buy. But that is going to be only a small proportion of consumers.

TT: Then do you expect sluggish auto sales to go up this year and how will the local auto industry compete with foreign firms to grab market share?

Shen: Many have anticipated a mild recovery, but we haven't seen any signs of recovery yet. Therefore, auto sales this year are likely to maintain last year's roughly 350,000 units.

However, we've seen competitiveness and growth building up on some sub-segments within the same market. We found that demand for cars with engines over 2,000cc has declined to a 20 percent share of the market in January from over 35 percent in the past. Demand for recreation vehicles (RV), such as sport-utility vehicles (SUV) and multi-purpose vehicles (MPV), is expanding, taking a 25 percent market share in January while it could only grab 10 percent in the past.

Therefore, targeting growing RV sales as our strategy, Ford has developed six different models including Escape and Mazda's Tribute to compete for market share.

TT: Are local consumer preferences helpful in predicting purchasing patterns?

Shen: I think Taiwanese consumers are unpredictably fascinating. They have absolutely no loyalty to brand names.

For the past 10 years, whatever company launches a car that satisfied their needs, crowds rush in to buy. In general, they are fickle in affection and always looking for something new in the market place, new in style, new in technology and new in interior.

Therefore, it has become very important for car dealers to be capable of predicting what consumer needs are ahead of time.

TT: Ford has decided to invest NT$10 billion in researching and designing new models. What are your strategies?

Shen: We'll put over half of our energy in developing new RV models because RV has become a global trend.

Besides, Taiwan is ready to embrace the upcoming long-weekend off schedule [to have more time for recreation]. Actually, back in January, a car exhibition in Detroit mostly displayed various RV models, which is a trend that I think Taiwan should be quick in picking up. In addition, January's auto sales showed that more people are shopping for RV models. It's not difficult to understand why since traditional cars just don't have the same capacities as RVs. My experience tells me that I can't fit my two kids and their bicycles in my old car regardless of how big it is. More and more parents are spending quality time with their children during weekends and I think they will eventually need an RV to facilitate their recreational needs.